Covering the EU’s “Fit for 55” package of climate and energy laws

After nearly two years of legislative process, EU institutions took the final legislative step for several of the law reforms in April 2023. They greenlighted the ETS revision, the introduction of a carbon border tax (CBAM) and the Social Climate Fund. These reforms can now be enacted.

EU institutions also reached a provisional agreement on the Renewable Energy Directive, aiming to raise the EU's binding renewable target for 2030 to a minimum of 42.5%. Parliament and Council now have to offically greenlight this agreement.

Several other items are still being negotiated, such as the Energy Performance in Buildings Directive.

Find out more about the status of legislative items on the European Parliament's "legislative train schedule" website.

The European Commission presented these elements of the package on 14 July. Some of them are reforms of existing regulation, others are new proposals.

• Revision of the EU Emission Trading System (EU ETS), including revision of the EU ETS Directive concerning aviation, maritime and CORSIA
• Revision of the Regulation on the inclusion of greenhouse gas emissions and removals from land use, land use change and forestry (LULUCF)
• Effort Sharing Regulation
• Amendment of the Renewable Energy Directive to implement the ambition of the new 2030 climate target
• Amendment of the Energy Efficiency Directive to implement the ambition of the new 2030 climate target
• ReFuelEU Aviation - sustainable aviation fuels
• FuelEU Maritime – green European maritime space
• Revision of the Directive on the deployment of alternative fuels infrastructure
• Amendment of the Regulation setting CO2 emission standards for cars and vans
• Carbon Border Adjustment Mechanism
• Revision of the Energy Tax Directive
• Climate Action Social Facility

On 15 December 2021, the Commission presented the second part of the package with these elements:

• Revision of the Energy Performance of Buildings Directive
• Revision of the regulation on the internal markets for renewable and natural gases and for hydrogen
• Directive on common rules for the internal markets in renewable and natural gases and in hydrogen
• Regulation on methane emissions reduction in the energy sector

The Commission proposed to reform the existing EU ETS so that it leads to a 61 percent reduction in the covered sectors by 2030 (compared to 2005). Parliament is likely to demand more, as its environment committee proposed a 67 percent cut. In addition, the Commission aims to phase out the free allocation of emission allowances to aviation and to the sectors that are to be covered by the planned CBAM. This has been a major moot point, especially for industry.

Establishing emissions trading in transport and buildings (ETS2) – The Commission proposed to set up a second emissions trading system for these sectors, but several members states and parliamentary groups have criticised this plan. Germany has been a key supporter of the proposal. It introduced a carbon price for these sectors in 2021. A key criticism is that such a system would overly burden lower-income citizens, especially at a time when fuel prices are at record highs – a situation that is exacerbated by Russia’s war against Ukraine. European lawmakers agreed a compromise proposal, which would see private individuals exempted from the CO2 price for the foreseeable future.

The Commission has proposed that a quarter of the revenues from the new emissions trading system should fill the new so-called Social Climate Fund, which states would have to use to help citizens finance investments in energy efficiency, new heating and cooling systems or clean mobility. There have been many debates about what the Social Climate Fund should or should not finance, and whether funds could be withheld if countries do not adhere to democracy and the rule of law. Should private citizens be exempt from the ETS2, less money would be available for the fund. NGOs and social groups have said that the funds should be used to help low-income households.

The Commission proposed that all new passenger cars must produce zero CO2 emissions at their tailpipe by 2035. There has been strong lobbying from some industry players to soften this and the interim targets for emissions from cars, for example by allowing combustion of green fuels, arguing this would be climate neutral. The conservative EPP group in the European Parliament has sought to replace the de facto ban on fossil and diesel vehicles by 2035 with a 90 percent emissions reduction target. Parts of the German car industry – especially suppliers – have long fought to keep the combustion engine car alive.

CLIMATE

EU Emission Trading System (EU ETS), CO2 for cars, Effort sharing, LULUCF

European Commission: Tim McPhie

Energy Brainpool (consultancy): press contact: Lydia Bischof (lydia.bischof@energybrainpool.com)

Oliver Geden, senior fellow at the German Institute for International and Security Affairs (SWP), lead author for Working Group III & member of the Core Writing Team for Synthesis Report IPCC

ICIS (commodity intelligence service): Florian Rothenberg (florian.rothenberg@icis.com)

Refinitiv (financial markets data provider): media contact – Hæge Fjellheim , Ingvild Sørhus

The Potsdam Institute for Climate Impact Research (PIK): press contact: Jonas Viering (Jonas.Viering@pik-potsdam.de)

Clean Air Task Force Europe (advocacy/think tank): press contact: Rowan Emslie (remslie@cleanairtaskforce.org)

TRANSPORT

AFID, Maritime + Aviation fuel initiatives

European Commission: Stefan de Keersmaecker

Transport & Environment (think tank): press contact: sam.hargreaves@transportenvironment.org, eoin.bannon@transportenvironment.org )

International Council on Clean Transportation (ICCT) (think tank): Peter Mock (peter@theicct.org)

European Automobile Manufacturers’ Association (ACEA) (interest group): press contact: communications@acea.auto

EU lawmakers face hundreds of amendments in key votes on climate policies, by Reuters (7 June 2022)

Press Kit for Press Seminar “Climate crisis & energy dependency: the ‘Fit for 55’ package to accelerate Europe’s green transition, by European Parliament (1 June 2022)

Press release and full material of Commission proposals (14 July 2021)

Delivering the European Green Deal, website by European Commission

Legislative Train Schedule of the Fit for 55 Package, by European Parliament

Fit for 55, website by EU Council (i.e. member state governments)

Q&A: How ‘Fit for 55’ reforms will help EU meet its climate goals, in-depth Q&A on Commission proposal by Carbon Brief (20 July 2021)

The Seven Elements of the EU Green Deal You Should Care About, Bloomberg (14 July 2021)

EU aims to “give humanity a fighting chance” with catch-all climate plan, Reuters (14 July 2021)

Fit for 55, article collection by EurActiv

Energy transition in EU takes centre stage in quest for climate neutrality, dossier by Clean Energy Wire (June 2021)